Internet Tax Issue Heats Up

A petition designed to prevent Internet taxation is gaining momentum and has increased its roster to 18,122 people after it was released earlier this month.

The "World-Wide Petition to Prevent Internet Taxation," written by Mark Joyner, CEO of Aesop Marketing Corp., Los Angeles, states that there is a genuine threat of Internet taxation looming and it is up to the Internet community to make sure that it doesn't take place.

"We are trying to take sort of an extreme approach to this, because we are almost convinced that there are going to be some taxes on the Internet," said Aesop spokesman Peter Hanson. "We need to send a signal to politicians and let them know that we do not want them to get into some unbridled type of taxing."

Many online merchants like Aesop do not want taxes added to Internet commerce because their customers can purchase products on their sites without having to pay sales taxes. Currently, most online retailers charge a sales tax only in the states where they are based or have meaningful online operations.

Online merchants also believe that implementing a sales tax could slow development of the Internet. One study says the number of online shoppers would fall by 24 percent if an Internet tax were imposed.

"If it becomes at all cumbersome for the consumers to get online and buy something -- and taxation can make things more cumbersome -- then of course it is going to hit everybody's bottom line," Hanson said.

The company has been alerting people to the petition and its Web site (www.nomorenettax.com), through newsletters and through links placed on other sites.

The petition was written after the 19-member Advisory Commission on Electronic Commerce met for the first time last month in Williamsburg, VA.

According to Hanson, the goal of the panel is to have new tax legislation in place when the three-year moratorium on new federal, state and local e-commerce taxes expires in October 2001. The next meeting will take place Sept. 14 in New York.

But not all members of the Commission necessarily want taxation to take place.

"In my opinion, if we enacted a major use tax collection system in this country right now, things would be much more complicated and much more unfair," said Stanley S. Sokul, a member of the commission who represents the Association of Interactive Media, Washington. "Right now, I think it is neutral. If you have nexus you collect taxes. But going beyond that it becomes more unfair to the Internet marketer and the direct marketer."

But, many members of the business community want Internet taxation since the current system means their online competitors have an unfair advantage. State and local officials also want taxation, because its absence cost them $1.2 billion in sales tax revenue in 1998, and those losses could grow to $20 billion by 2002.

Some companies, like computer and music retailer Best Buy, Eden Prairie, MN, which has both an online presence and retail stores, support legislation -- as long as it is fair. Best Buy's online division charges a sales tax for orders it fills from Minnesota customers as well as for orders from California, where it has a distribution center; but not from anywhere else.

"We support any legislation that will level the playing field between traditional box retailers and Internet-only retailers," said John Walden, president of the company's electronic commerce operations. "And that can mean a uniform Internet tax to replace the disparate state taxes that are out there or just an elimination of tax on the Internet all together."

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